# Underlying concepts

Latest release
Family, Household and Income Unit Variables
Reference period
2014

## Name of variable

The name of the variable is 'Income unit composition'.

The primary factor determining 'Income unit composition' is the assumption that particular groups of people within a household will pool their income and share the benefits. Any person not belonging to a multi-person income unit represents an income unit in their own right. The basis for identifying the income unit is 'Relationship in household'. For more information, see the 'Relationship in household' standard.

## Definition of variable

### Nominal definition

The variable 'income unit' is nominally defined as:

• A group of two or more related people in the same household assumed to pool their income and savings and to share the benefits deriving from them equitably; or
• One person assumed to have sole command over their income, consumption and savings.

This definition is the basis of the operational definition of 'Income unit composition'.

The variable 'Income unit composition' is defined as:

• The differentiation of income units on the basis of the number of people in the income unit and the presence of dependent children.
• 'Income unit composition' is an attribute of the statistical unit 'income unit'.

### Operational definition

Operationally, 'income unit' is defined as:

• A group of two or more people who are usually resident in the same household and are related to each other through a couple relationship and/or parent/dependent child relationship; or
• A lone person who is not party to either such relationship.

The operationalisation of 'Income unit composition' is:

• The allocation of people in households to categories of the 'Income unit composition' classification on the basis of their relationship to other members of the household.

## Scope of the variable

The variable 'Income unit composition' applies to all income units.

## Supporting variables

'Income unit composition' requires the supporting variable 'Relationship in household'.

## Discussion of conceptual issues

Multi-person income units comprise people within a family, each of whom is related to another by either a couple relationship or a parent/dependent child relationship. Any person not party to such a relationship, including non-dependent children, is treated as a separate income unit.

It is important to recognise these related points:

• Many Australian dwellings accommodate a single household, comprising a single family and a single income unit.
• While a family must comprise two or more people, an income unit (or a household) may comprise only one person.
• Certain variables, e.g. 'Tenure type', apply primarily to the counting unit 'income unit'. These can also apply by extension to the 'larger' units of 'family' and 'household'.

The concept of the income unit rests on two assumptions:

• There are certain family relationships where all income is pooled and shared between all those so related, who benefit equitably from access to their common financial resources.
• People not party to such a relationship have access to their own financial resources over which they exercise exclusive control.

An additional assumption underlies the operationalisation of the concept:

• The relationships about which the ABS makes those assumptions are those between partners in a couple relationship and between parents and their dependent children. In many cases this operational assumption may not be appropriate. For example, if young adults up to the age of 21 who are not full-time students and are unemployed are present (who are unlikely to have significant financial resources of their own), it may be more appropriate to use the household as the unit of analysis.

In ABS statistics, a dependent child is classified as either a child under 15 or a dependent student (i.e. a full-time student aged 15-24 living with his or her parents and with no child(ren) or partner of his or her own) irrespective of his or her financial dependency.

An operational constraint of household surveys is that the income unit, like the family, must comprise usual residents of the same household. There are, however, a number of circumstances that may result in parents and their financially dependent children living apart. Specifically, this occurs where:

• Full-time students live away from home, and
• Non-custodial parents provide for dependent children living in another household.